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Rating Action:

Moody's changes outlook to stable on 30 Brazilian banks and BM&FBovespa; affirms ratings

 The document has been translated in other languages

16 Mar 2017

Action follows the change of the outlook on Brazil's Ba2 sovereign rating to stable

New York, March 16, 2017 -- Moody's Investors Service has today changed the outlooks to stable, from negative, of certain ratings of 30 Brazilian banks and their affiliates and the Brazilian stock and futures exchange BM&FBovespa S.A.. In addition, Moody's affirmed all the affected ratings. These actions follow the change in outlook to stable, from negative, on Brazil's government bond rating of Ba2, on 15 March 2017. For additional information, please refer to the related announcement: https://www.moodys.com/research/--PR_362466

Specifically, Moody's revised the outlooks on the issuer and local currency deposit and foreign currency senior unsecured debt ratings of 16 domestically-owned banks that are constrained by Brazil's sovereign rating, as well as those of several foreign-owned banks and BM&F Bovespa that are above the sovereign. Moody's also changed the outlooks on the long-term global foreign currency deposit ratings that are capped by Brazil's Ba3 foreign currency deposit ceiling. At the same time, Moody's affirmed the ratings and baseline credit assessments of 19 Brazilian banks.

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_194864 for the List of Affected Credit Ratings. This list is an integral part of this press release and identifies each affected issuer.

RATINGS RATIONALE

These rating actions were prompted by the change in outlook to stable, from negative, on Brazil's bond rating. Sovereign credit quality can directly affect the credit standing of other issuers domiciled within the country, and, more generally, tends to be associated with macroeconomic and financial market trends that affect all domestic issuers. Banks in particular exhibit strong credit interlinkages with their sovereign. As such, the change in Brazil's outlook to stable, from negative, reduced the risk of these financial institutions being downgraded in conjunction with a sovereign downgrade.

Consequently, Moody's changed the outlooks on 18 entities' local currency deposit ratings, 3 local currency issuer ratings, 28 foreign currency deposit ratings, and 9 foreign currency senior unsecured debt ratings. At the same time, Moody's affirmed all ratings whose outlooks were revised, as well as the ratings and baseline credit assessments of 19 issuers.

The affirmations consider that the credit fundamentals of the affected financial institutions remain sound despite the depth and duration of Brazil's recession. The stable outlooks consider that the underlying fundamentals of the affected issuers are stable and/or the affected ratings continue to be constrained by Brazil's sovereign rating or its country ceilings.

The impact of the recession on Brazil's banking system, and in particular the banks affected by today's action, has been contained. The system-wide non-performing loan ratio remains moderate at 3.7%, up just 90 basis points from January 2015 while loan loss reserves total 6.5% of gross loans. In addition, Brazilian banks continue to post strong earnings notwithstanding mounting credit costs, with return on assets averaging 1.1%, and capitalization has remained stable. Strong liquidity and a largely domestic funding structure reduces the vulnerability of Brazilian banks to unexpected shocks from global markets, and will support the gradual expansion of lending activities.

The recession finally appears to have bottomed out, laying the foundation for a modest recovery as business and consumer confidence improve. Nevertheless, banks will remain cautious in 2017; following a 3.5% contraction in 2016, credit markets are expected to expand by just 2% in the year. The lagging effects of the deep downturn over the past two years and the high level of unemployment will continue to pressure asset quality, but any further deterioration of the system-average problem loan ratio is expected to be limited. At the same time, profitability is expected to improve as declining domestic interest rates reduce funding costs, and credit costs begin to decrease, helping to compensate for still low business volumes.

WHAT COULD CHANGE THE RATING -- DOWN/UP

The affected ratings could face upward pressure if Brazil's government bond rating is upgraded and its country ceilings raised. Upward pressure could also depend upon an improvement in the issuers' credit fundamentals or Brazil's macroeconomic environment. On the other hand, if Brazil's government bond rating again faces downward pressures, the affected ratings would be negatively pressured as well.

ENTITIES AFFECTED

1. Banco ABC Brasil S.A.

2. Banco Alfa de Investimento S.A.

3. Banco BBM S.A.

4. Banco Bradesco S.A. and Banco Bradesco S.A. Cayman Branch

5. Banco BTG Pactual S.A.

6. Banco Cetelem S.A.

7. Banco Citibank S.A.

8. Banco Cooperativo Sicredi S.A.

9. Banco Daycoval S.A.

10. Banco do Brasil S.A. and Banco Do Brasil S.A. (Cayman)

11. Banco do Estado de Sergipe S.A.

12. Banco do Estado do Para S.A.

13. Banco do Estado do Rio Grande do Sul S.A.

14. Banco do Nordeste do Brasil S.A.

15. Banco Ford S.A.

16. Banco GMAC S.A.

17. Banco Industrial do Brasil S.A.

18. Banco Mizuho do Brasil S.A.

19. BANCO NAC. DE DESENV. ECONOMICO E SOCIAL -- BNDES

20. Banco Psa Finance Brasil S.A.

21. Banco RCI Brasil S.A.

22. Banco Safra S.A. and Banco Safra S.A. (Cayman Branch)

23. Banco Santander (Brasil) S.A. and Banco Santander (Brasil) S.A. - Cayman Br

24. Banco Sofisa S.A.

25. Banco Votorantim S.A. and Banco Votorantim S.A. (Nassau Branch)

26. BM&FBovespa S.A.

27. Caixa Economica Federal (CAIXA)

28. China Construction Bank (Brasil) S.A.

29. ING Bank N.V. - Sao Paulo

30. Itau Unibanco Holding S.A. and Itau Unibanco Holding S.A. (Cayman Islands)

31. Itau Unibanco S.A. and Itau Unibanco S.A. (Cayman Branch)

METHODOLOGIES

The principal methodology used in rating Banco ABC Brasil S.A.; Banco Alfa de Investimento S.A.; Banco BBM S.A.; Banco Bradesco S.A. and Banco Bradesco S.A. Cayman Branch; Banco BTG Pactual S.A.; Banco Cetelem S.A.; Banco Citibank S.A.; Banco Cooperativo Sicredi S.A.; Banco Daycoval S.A.; Banco do Brasil S.A. and Banco Do Brasil S.A. (Cayman); Banco do Estado de Sergipe S.A.; Banco do Estado do Para S.A.; Banco do Estado do Rio Grande do Sul S.A.; Banco do Nordeste do Brasil S.A.; Banco Ford S.A.; Banco GMAC S.A.; Banco Industrial do Brasil S.A.; Banco Mizuho do Brasil S.A.; Banco Nac. Desenv. Economico e Social -- BNDES; Banco Psa Finance Brasil S.A.; Banco RCI Brasil S.A.; Banco Safra S.A. and Banco Safra S.A. (Cayman Branch); Banco Santander (Brasil) S.A. and Banco Santander (Brasil) S.A. - Cayman Br; Banco Sofisa S.A.; Banco Votorantim S.A. and Banco Votorantim S.A. (Nassau Branch); Caixa Economica Federal (CAIXA); China Construction Bank (Brasil) S.A; ING Bank N.V. - Sao Paulo; Itau Unibanco Holding S.A. and Itau Unibanco Holding S.A. (Cayman Islands) and Itau Unibanco S.A. and Itau Unibanco S.A. Cayman Branch, was Banks published in January 2016.

The principal methodology used in rating BM&FBovespa S.A. was Securities Industry Service Providers published in February 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in May 2016 entitled "Mapping National Scale Ratings from Global Scale Ratings". While NSRs have no inherent absolute meaning in terms of default risk or expected loss, a historical probability of default consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. For information on the historical default rates associated with different global scale rating categories over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1060333.

REGULATORY DISCLOSURES

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_194864 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items:

• Lead Analyst

• Methodologies

• Releasing Office

• Person Approving the Credit Rating

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Alcir Freitas
VP - Senior Credit Officer
Financial Institutions Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300

M. Celina Vansetti
MD - Banking
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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